If yesterday saw another Euro-bobble, today saw another Fed-bobble. The dufusses in charge, who are apparently kept incommunicado in the basement of the Fed Building, announced that things were "jes' fine!" & they didn't need to turn a peg for the economy. Now while I will vehemently defend the proposition that they are correct in not doing a blessed thing, & would be even correcter if they shut down the whole operation forever & went fishing, inaction was NOT what markets wanted to hear. Take for instance the stock market. Go to www.nasdaq.com or better yet to www.stockcharts.com & type in "$indu" for a chart. At www.ino.com with the symbol "DJI" you can get a 24 hour chart. Anyhow, look at the time the market fell to pieces: Lo & behold, about the time the Dufusses made their announcement. Any connexion, you wonder? Or is concluding that markets dropped because of the Fed's announcement the post hoc ergo propter hoc logical error? Are y'all kidding me? Markets have been trained to believe that their salvation comes only from the Fed, & if the Fed won't act, then who will save them? Sure won't be me, any more than it will be the Fed, in point of fact. But enough of this fun. I can always count on some official lamebrain somewhere in the world to furnish more fodder for my ridicule machine than I can possibly process in a single commentary. Can't help it, they make themselves ridiculous. Let's look at stocks first. In a word, they're sunk. Sinking below 12,000 today broke the back of more investors' morale. Tomorrow the Dow will break that 11,950, and its 200 day moving average (11,943) & tomorrow or the next day will slam to 11,600, then 11,400, then 11,200, and below that, 10,400. Ohh, it hurts to think about it. Dow today dropped 68.45 (0.55%) to close at 11,954.94. S&P 500 trotted right along beside it dropping 10.74 (0.87%) to 1,225.73. The Fed has created an addict. Together with the yankee government, it has created a market that is as addicted to inflation, Quantitative Easing, & all the other nicey-nice names for printing money as a meth-head is to meth. You tell a meth-head you aren't giving him any meth and to put down that two liter soft-drink bottle and stop shaking it, and he won't thank you. A nation, no, a world of meth-heads. That's what central banks have created. Y'all don't even want to think about currencies today. Dollar burst through that 79.80 resistance left by the last two tops and jumped 73.3 basis points, a perfervid 0.94%, to 80.267. And that leap took place? Right, about the time the Dufusses opened their mouths. Dollar's moving higher. Dollar now targets the late 2010 low at 81.44, no stretch at all from here. Above that is 83.50, and then 88.71. At that level the entire universe will be writhing, screaming, & begging for a lower dollar. Y'all know what this is? Not only financial panic out of Europe, THIS IS THE DEFLATION SCARE. Now the gurus will gurate, the mavens will mavinate, and the pundits will pander, all about how deflation is here and it's the bogeyman who will eat you up! Looking at the institutions built over the last 80 years with no purpose save to inflate, there's about as much chance of deflation as there is of my winning the Miss America swimsuit competition in my red long johns. But you will hear the media bloviate about it, & at last the Fed & its cronies will ride their printing presses to the rescue. I'm sorry. They're lamebrains are so active today that I feel like a dung beetle at a bull sale. There's just so much material, I don't know where to start or stop. The Euro broke down significantly, shattering that 1.3200 support and closed down a jumbo 1.13% at 1.3034. Now in sight is 1.2500. Thanks, Dufusses. Japanese yen closed down, too, a tee-tiny 0.06% to 128.25c/Y100 (Y77.97/$1). SILVER & GOLD blew hot and cold out of both sides of their mouths today, & then the Dufuss-effect took hold. Gold dropped $4.30 to close Comex at $1,659.90. Silver rose -- probably on short-covering -- 26c to 3119.5c. Ahh, but post-Dufusses they broke down. Silver lost 45c to 3074.5c and gold gave up another $28.40 in the aftermarket to $1,631.50. Gold has now sliced through its 150 DMA ($1,665) & set its sights on the 200 DMA (now $1,614). Support at $1,600 might catch gold and stop it, but the deflation scare could also drive it further. If it can't hold at $1,600 then $1,535 becomes likely. I have the same problem y'all do. If I shoot all my cash ammunition here, I won't have anything left to take advantage of lower prices. I feel safer watching it a day or two. Silver's next support down below lies around 3050c. Low today was 3038.7. Last low (November) was 3065. Look the worst square in the eye: silver could easily drop to 2615. Below that lies not much to stop its fall before it reaches 2000c. Yet there is also reason to suspect silver might catch a hand hold at 2900c. We just have to be patient here & let the market tell us what it intends. Right now it's keeping its cards too close to its breast to divine its ultimate intentions. Then there are those surprise parties to consider. You never know when or what governments will do next. I've been talking to metals dealers about the MF Global debacle, because many of them are hedgers and had accounts with MFG. My guess is they'll be a lot less likely in the future to leave money with any broker. Then, too, if they can't hedge, they must sell what they buy instead of holding it hedged. That can put downward pressure on prices, but more likely it could widen out the spread between buy & sell. We are seeing come to pass what I have long anticipated. Paper markets are unraveling. Now the very structure of the market itself must be questioned. In the bull market that peaked in 1980, paper (futures) prices drove silver & gold market. This time around, I think it will be more important to have actual physical possession, & that will means the physical price would be driving the market as the "real price", not the futures. We already saw that happen in the 2008 panic, when paper silver prices were 33% or more below physicals prices (physical silver carried a 50% premium over the paper price). Now, if some big entity that claims to have beaucoup silver stored suddenly goes belly up like John Corzine sent MFG belly up, well, who'll want "stored" silver then? On 13 December 1978 the Philadelphia mint began stamping its most spectacular failure in coinage history: the Susan B. Anthony dollar. With the Wicked Witch of the East on one side and a squashed bird on the other side (was that an eagle or a turkey buzzard?), the public avoided them in droves. Oh, and they were cleverly sized about the same diameter as a quarter, to make it easier to confuse the two coins. On 13 December 1809 Dr. Ephraim McDowell performed the world's first successful abdominal operation in Danville, Kentucky. When he examined 46-year old Jane Crawford, the doctor realized she was suffering from an ovarian tumor and would die without the surgery. Surgery had never been attempted because of the risk of fatal infection. McDowell operated and removed a 22 pound tumor. His patient recovered and lived to be 79. McDowell only made it to 58.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger
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